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Stern v. FEC


On December 11, 1990, The U.S. Court of Appeals for the District of Columbia Circuit affirmed the district court decision granting the Commission's motion for judgment on the pleadings. Philip M. Stern had claimed that the General Electric Company (GE) violated the Federal Election Campaign Act by making unlawful corporate expenditures for the establishment, administrative and solicitation expenses of its separate segregated fund, GE/PAC.


Although section 441b(a) of the Federal Election Campaign Act prohibits corporations from using their general treasury funds to make contributions or expenditures in connection with a federal election, another provision of the Act specifically excludes from the definitions of contribution and expenditure the use of corporate treasury funds for "the establishment, administration, and solicitation of contributions to a separate segregated fund to be utilized for political purposes...." (Emphasis added.) 2 U.S.C. §441b(b)(2)(C). In his complaints filed with the FEC and the courts, Mr. Stern alleged that GE/PAC's contributions were not made for "political purposes" but, rather, were made to advance GE's lobbying interests. As a result, he claimed, GE's funding of the PAC resulted in prohibited corporate expenditures.

When the Commission dismissed his administrative complaint, finding "no reason to believe" that GE had violated the law, Mr. Stern sought judicial review of the agency's decision. The district court ruled that the Commission had not acted contrary to law in dismissing the complaint, holding that GE/PAC's direct contributions to the campaigns of federal candidates were permissible under any construction of "political purposes." The district court found it unnecessary to reach the question of whether lobbying was a permissible activity for a separate segregated fund, although the court characterized the Commission's position-that separate segregated funds could be used "for any lawful purpose"-as a reasonable interpretation of the Act.

Appeals court decision

In his arguments, Mr. Stern claimed that several types of contributions made by GE/PAC were not made for "political purposes":

  • Contributions to unopposed candidates or to those facing weak opposition;
  • Contributions made without regard to the candidate's position on business issues;
  • Contributions to opposing candidates in the same election;
  • Post-election contributions to winners; and
  • Contributions to incumbents.

The appeals court examined these claims but found that the GE/PAC's contributions did not violate the Act. Like the district court, the appeals court found no reason to reach the question of how the phrase "political purposes" should be interpreted. "Even under the narrowest possible definition urged by Stern-namely, that segregated funds may be used only 'in connection with an election'-the GE/PAC practices he challenges do not violate the Act."

Source:   FEC RecordFebruary 1991; November 1989. Stern v. FEC, No. 89-0089 (D.D.C. 1989) (memorandum opinion), 921 F.2d 296 (D.C. Cir. 1990).